IKEA Furniture Company: Business Strategy, Swot Analysis And Porters 5 Forces

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IKEA Furniture Company: Business Strategy, Swot Analysis And Porters 5 Forces

Company Introduction

IKEA is known as one of the most successful global retailers that the world has ever seen. Known for their excellent customer fulfillment system, warehousing techniques, good relationship with suppliers, etc., but most of all its furniture product line that delivers stylish quality at a low-cost strategy. The culture within the company is known to create a unique atmosphere for its employees and customers, ensuring they perform at the highest level. The established Ingvar Kamprad is known to be one of the world’s wealthiest people. He started out producing products via mail. During this journey he discovered a problem within the logistical side of his fulfillment system, and ever since then Kamprad was able to become successful through buying storage and allowing the growth of his vision.

Business Strategy

IKEA utilizes a great long-term strategy of cost leadership which has shown to be successful on a global scale. They aim to keep prices low for those who can’t afford it, allowing the customer to be satisfied with their options. The company puts style at the front of their brand image. When customers go into a store it is set up with specific product positioning which has been an effective marketing strategy for their business. Kamprad wanted IKEA’s employees and customers to feel relaxed and in a unique refreshing environment. Lastly noted as a key business strategy is the self-assembly led suppliers wanting no part in selling to IKEA. This forced them to find new suppliers. In doing so Poland turned out to be an extremely cheaper supplier and created a great relationship between them.

SWOT Analysis

Analyzing IKEA’s Strengths, they have a great variety of products that have suitable styles for today’s market. They’re very strong in the global market for example, China, they provide low cost and their brand image is greatly reputable. Weaknesses for IKEA are transportation costs, locations of stores, getting more appeal to Americans, furniture assembly might not be for everyone and local competition. Threats IKEA should be aware of are, status of the global economy. The amount of control they may have in the global market. Opportunities show expansion to more markets, more effective advertisement, appeal to a younger market, they can have a low entry barrier in some countries. Threats are the way people are shopping, such as online, e-commerce, etc. Possibility of a recession. The more competition that enters the market. An issue they may face is the amount of manpower discussed in the article. That needs to be addressed right away within their business strategy team.

Porters 5 Forces

Bargaining power of suppliers: The amount of suppliers IKEA has a very efficient amount. They can control the pricing with their suppliers which is a crucial advantage. They have the right strategy that suits them and as discussed in the article it has done a great deal for the company. Bargaining power of buyers: should be understood that IKEA has limited to no control. Their customers all have a different variety of needs, making IKEA trying to fulfill all of them. Rivalry among existing competitors: IKEA’s competitors are growing, and they are innovating quickly. IKEA must be aware of this and try to stop them from consuming foreign markets. Threats of substitutes: For IKEA there doesn’t show a sign of need for concern. Being one of the most successful companies in the industry with many valued customers allows them to hold this status. IKEA should keep a close eye on their market sensing capabilities to avoid this threat. Threat of new entrants: Interpreting IKEA’s status I comparison to its competitors is clear cut. The firm holds great power within the industry due to its brand image and product differentiation. IKEA can look at how profitable they are and understand the market conditions predicting any possible competitor entrants.

Conclusion

IKEA’s overall business strategy is very successful. The company has great leader experience. I believe Kamprad is a transitional leader who can give insight to all divisions of management for future success. IKEA must continue its global success by utilizing its low-cost differentiation strategy more efficiently. In China I suggest finding a new strategy that will utilize local suppliers so pricing will be more controllable. They have great adapting skills within their market by redefining its offerings. IKEA can continue its excellent manufacturing skills by getting the right manufacturer for the job. I believe targeting new vast markets can be vital for the continuation of success. Keep aiming at the younger target market as there are immersive opportunities within it. All recommendations and expanding require more manpower. IKEA can hire more levels of management across all foreign markets to insure sustainability. If IKEA can build off its great product and low costing strategy along with adding more promotion and target market options this will increase profits, revenue and market share.